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[2002] NSWSC 1123
mixed. Resolution B was declared incapable of valid passage; the Court rejected NRMA’s challenges to Resolution A and its requisition, held that NRMA was obliged to convene a meeting to consider Resolution A,...
Palmer J decided that NRMA members could propose removing five named directors through one resolution. The fact that one of those directors resigned after the requisition did not prevent the meeting from considering an amended resolution without that person’s name. A separate proposal to remove people who might become directors in the future was invalid because it would remove them before they could use the statutory opportunity to put their case to members. The defendants’ hostility or self-interest did not invalidate the requisition for the valid resolution: the relevant question was whether the meeting was sought for the purpose of considering that resolution. NRMA therefore had to convene a meeting to consider Resolution A.
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NRMA applied to the Supreme Court of New South Wales for declarations that it was not required to convene a meeting requisitioned by members Ian Scandrett and William Snodgrass. The requisitions were served on 18 October 2002. Sufficient members had joined them to meet the threshold in s 249D(1)(b) of the Corporations Act 2001 (Cth), and that point was not disputed ([1], [7]).
1 cited instrument linked from this judgment.
The requisitions proposed two resolutions. Resolution A named five directors, Kathleen Evans, Bruce Fisher, Brian Johnston, Ken Rennie and Ross Turnbull, for removal. Each had been appointed to fill a casual vacancy following another director’s resignation ([5]–[6]). Resolution B was framed to remove any director appointed to fill a casual vacancy during a future period linked to polls at NRMA meetings ([5]). When judgment was given, the period specified in Resolution B had not started ([8]).
NRMA challenged the resolutions on several grounds. It argued that neither could validly be passed, that a meeting would not be for a proper purpose under s 249Q, and that the defendants had exercised their s 249D right for an improper purpose. NRMA also sought orders preventing further similar requisitions and, alternatively, an extension of time for the meeting under s 1322 ([2]–[3]).
The defendants did not appear at the hearing because, their solicitors informed the Court, they lacked funds for legal representation. Palmer J noted that the case was therefore argued without a contradictor, while acknowledging counsel’s assistance in drawing attention to authorities both for and against NRMA’s arguments ([4]). That procedural context is relevant when reading the judgment: the Court recorded that some important issues would have benefited from balanced argument.
The result divided between the two resolutions. Resolution A could validly be considered and passed as a single resolution. The requisition for a meeting to consider it was valid, so NRMA was obliged to convene a meeting. Resolution B, by contrast, could not validly be passed because it sought to remove future, unidentified directors ([35], [59]). The Court did not determine the outstanding question whether the defendants’ draft statement under s 249P was defamatory or had to be distributed to members; those matters and costs remained for later consideration ([62]–[63]).
For Resolution A, NRMA argued that directors must be assessed independently and therefore could only be removed through separate resolutions. Palmer J rejected the link between a director’s duty to act independently in office and the procedure for members to remove directors. Members might, for example, consider several directors incompetent, or decide that several directors involved in the same conduct should be removed. Each director would retain an individual opportunity to put their case to members, but that did not mean each needed a separate resolution ([12]–[14]).
NRMA also relied on s 201E, which restricts voting together on the appointment of two or more directors unless members have first unanimously approved that approach. Palmer J accepted that the rule addresses the risk of members having to accept an unwanted candidate in order to appoint a preferred one. But he held that the appointment rule could not simply be transferred to removals. Appointments and removals differ in their nature and consequences. Members may have less information about an appointment candidate, while they may know more about directors whose performance in office is being considered. And if members support keeping one of several directors named for removal, they can vote against the resolution or seek a suitable amendment ([16]–[21]).
The Court also relied on the statutory text and its legislative context. Section 203D did not contain a voting rule equivalent to s 201E. Palmer J considered the omission significant, particularly because the issue of block voting had been discussed in relation to appointments without a corresponding rule for removals. He rejected the argument that references to “a director” and “the director” in s 203D required one director per resolution ([21]–[29]).
On this point, the Court followed Taylor v McNamara [1974] 1 NSWLR 164. Taylor had construed materially similar language in the Companies Act 1961 and applied the NSW interpretation rule that the singular could include the plural. Palmer J held that s 23(b) of the Commonwealth Acts Interpretation Act 1901 had the same relevant effect and that no contrary intention appeared in s 203D. He considered Taylor correctly decided and followed it ([23]–[29]).
The resignation of Mr Rennie did not make Resolution A incapable of consideration. Applying the approach in Totally & Permanently Incapacitated Veterans’ Association of NSW Ltd v Gadd, the Court treated an amendment deleting the name of a director no longer in office as remaining within the resolution’s general substance. The resolution’s central purpose was to remove the named directors who were still in office; removing an ex-director’s name would propose something less, not change the subject of the notice ([30]–[33]).
Resolution B raised a different statutory problem. If passed as drafted, it would remove a person immediately upon appointment to fill a future casual vacancy. That would prevent the appointee from exercising the s 203D rights to put their case to members. Palmer J regarded that consequence as decisive: s 203D applied only to a director in office when notice of intention to move the removal resolution was given. The future appointees were not identified and were not yet directors at that time, so Resolution B was invalid ([34]–[35]).
Finally, Palmer J considered whether the s 249D requisition for Resolution A was invalid because the defendants allegedly had improper purposes, including seeking board control or imposing expense on NRMA. NRMA bore the onus of establishing the alleged intention to inflict unnecessary expense as a tactic. The evidence did not satisfy that onus. The defendants’ statements and the circumstances showed their belief that the board appointments had harmed the company and entrenched a faction, although the Court did not decide whether that belief was correct ([48]–[51]).
The Court distinguished purpose from motive. A requisition made to have a meeting consider and, if thought fit, pass the resolution served the statutory purpose. Ill-will or self-interest motivating that purpose did not itself invalidate the exercise of the right. Palmer J connected this distinction with the abuse-of-process authorities cited in the judgment ([53]–[56]).
The judgment addressed the interaction of three statutory provisions: s 201E, governing resolutions for multiple director appointments; s 203D, governing removal of a public-company director; and s 249D, allowing members meeting the statutory threshold to requisition a general meeting. It also applied s 23(b) of the Acts Interpretation Act 1901 (Cth) to the wording of s 203D ([10], [15], [27]).
Before this decision, Taylor v McNamara had held that materially similar statutory language permitted a single resolution to remove multiple directors. NRMA argued that Taylor should not be followed because it had not accounted for the policy behind the predecessor of s 201E. Palmer J rejected that challenge and confirmed Taylor’s approach for s 203D, reasoning that the appointment-voting rule did not imply a matching restriction on removal ([22]–[29]).
The judgment therefore clarifies, on the statutory text before Palmer J, that the separate-voting protection for multiple appointments did not govern a resolution removing multiple directors. It also draws a limit: the power was not a means of prospectively removing unnamed people who might later become directors. The statutory opportunity to put a case to members informed that distinction ([34]–[35]).
On requisitions, the judgment restated the principle that the statutory right must be used for its designated purpose, but separated that purpose from a member’s personal motivation. Its application is specific: the evidence did not show that the defendants’ purpose was anything other than to have the proposed resolutions considered. The Court did not hold that every requisition framed as a removal resolution is necessarily proper regardless of its actual purpose or evidence ([37]–[56]).
The supplied judgment does not set out later amendments to these provisions or subsequent appellate treatment. Accordingly, it supports an account of Palmer J’s 2002 construction and reasoning, not a claim about the present text of the legislation or how later courts have applied the decision.
At [14], Palmer J stated that directors’ independent duties do not impose an obligation on members to consider each director’s removal separately. In plain English, the board members’ duties while in office and the members’ choice of how to vote on a removal proposal are different questions.
At [18], the Court said s 201E’s appointment policy could not be read into s 203D. This means the Court would not infer a removal restriction from a provision that expressly dealt with a different subject, particularly when Parliament had not included a comparable rule in the removal provision.
At [29], Palmer J said Taylor v McNamara was rightly decided and should be followed. The significance is that the Court treated the earlier decision as directly applicable because the relevant statutory language and interpretation rule were materially the same.
At [32], the Court reasoned that removing Mr Rennie’s name would remain within the substance of Resolution A. Put simply, a meeting could consider removing the directors still in office even though one person originally named had resigned.
At [35], the Court held that s 203D applied only to a director already in office when notice of intention was given. The practical reason was procedural fairness within the statute: a future appointee could otherwise be removed immediately without having the opportunity to address members.
At [53], Palmer J distinguished purpose from motive. A member might be hostile to a director, or act out of self-interest, but that motivation does not by itself defeat a requisition if its actual purpose is to have a meeting consider the resolution.
At [59], the Court stated the operative result for Resolution A: it could validly be passed and the requisition was valid. This did not resolve Resolution B, which the Court had already found invalid, or the remaining statement and costs questions.
The closest fit is a public company dispute in which members propose one resolution to remove several directors who are all in office when the statutory notice is given. The judgment supports the proposition that the resolution is not invalid merely because it groups several named directors together. The fact that directors may have separate individual explanations does not, by itself, require separate resolutions ([12]–[14], [21]–[29]).
A related fit is where a named director resigns after a removal requisition but before the meeting. The case treats deletion of that person’s name as a permissible amendment if the substance remains the removal of the directors still in office ([30]–[33]). The judgment does not decide every possible amendment question: it relies on the particular amendment being within the general substance of the original proposal.
The contrasting fact pattern is a proposal targeting people who are not yet directors, or who cannot be identified when notice is given, and providing for their immediate removal on appointment. Resolution B illustrates why this may conflict with the s 203D opportunity to put a case to members ([34]–[35]).
For requisitions, the decision is relevant where there is evidence of personal hostility or self-interest. It requires attention to the actual purpose for which the statutory right is exercised, rather than treating animosity alone as decisive. The Court’s conclusion also depended on the evidence: it found no proof that these defendants intended unnecessary expense as a tactic, and accepted that they genuinely held concerns about the board appointments ([48]–[56]). The judgment does not establish that expense, factional campaigning, or hostile statements could never be relevant to the factual inquiry.
The supplied text does not identify any later court’s treatment of NRMA Limited v Scandrett. It would therefore be unsupported to describe the decision as later followed, distinguished, confined, or overruled.
The judgment itself identifies the earlier authorities it applied or discussed. It followed Taylor v McNamara on whether one resolution could remove multiple directors ([22]–[29]), applied the amendment principle from Totally & Permanently Incapacitated Veterans’ Association of NSW Ltd v Gadd ([31]–[32]), and referred to Ngurli and Humes for the proposition that a requisition right must be exercised for the purpose for which it was given ([37]). It discussed Williams v Spautz and cited Swansson, Dowling and IOC Australia in explaining why an otherwise proper legal process is not invalid merely because it is motivated by malice or hostility ([54]–[56]).
Palmer J also endorsed Windeyer J’s observations in NRMA v Snodgrass about the low requisition threshold relative to NRMA’s membership and the possibility of prescribing a different number by regulation. The endorsement did not alter the Court’s application of the rights as they then stood: members’ rights had to be decided on the existing statutory basis ([57]).
The judgment did not decide whether the defendants’ draft statement under s 249P was defamatory or whether NRMA had to distribute it. Those matters were not argued and were stood over, along with costs ([62]–[63]).
It also did not decide the merits of the defendants’ criticism of the directors or whether the appointments actually harmed NRMA. Palmer J expressly treated those matters as outside the issues for decision ([49]). The holding was about the validity of the proposed resolution and requisition, not the wisdom of the members’ preferred board outcome.
The decision’s future application may depend on the precise wording of a proposed resolution, the timing and contents of statutory notices, the company’s constitution, and evidence of the requisitionists’ actual purpose. The judgment resolves the particular questions before it, but does not set out a comprehensive test for every possible challenge to a meeting requisition.
Finally, this source does not establish the current statutory wording or later judicial treatment. Those matters would need checking against up-to-date legislation and subsequent authorities before using the decision in current legal analysis.
This is general legal information, not legal advice. Zoe can make mistakes. Before acting on this, relying on it, or using any draft, have a qualified Australian lawyer check it.
Reported Decision : 43 ACSR 401 (2003) 21 ACLC 176
CITATION : NRMA Limited v Scandrett & Anor [2002] NSWSC 1123 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 5261/02 HEARING DATE(S) : 18 November, 2002 JUDGMENT DATE : 25 November 2002
National Roads and Motorists' Association Limited - Plaintiff PARTIES : Ian Morris Scandrett - First Defendant William Snodgrass - Second Defendant JUDGMENT OF : Palmer J
COUNSEL : M.L.D. Einfeld QC, R.G. McHugh - Plaintiff No appearance for Defendants SOLICITORS : Corrs Chambers Westgarth - Plaintiff No appearance for Defendants CATCHWORDS : CORPORATIONS - MEETINGS - REQUISITION - DIRECTORS - RESOLUTION FOR REMOVAL - Defendants requisitioned general meeting for the purpose of considering single resolution for the removal of five named directors as a group (Resolution A) - whether more than one director can validly be removed by a single resolution - general policy of Corporations Act - construction of s.203D. HELD: Resolution A is valid. - RESOLUTION FOR REMOVAL - FUTURE DIRECTORS - Defendants requisitioned general meeting for purpose of considering resolution to remove any director who might be appointed during a specified future period to fill casual vacancies (Resolution B) - construction of s.203D. HELD: Section 203D applies only to a resolution to remove a director who is in office at the time that notice of intention to remove the resolution is given to the company - Resolution B is invalid. - REQUISITION - IMPROPER PURPOSE - VALIDITY - Whether Defendants had improper purpose in exercising right to requisition a general meeting under s.249D - whether exercise of right was invalid - distinction draw between the purpose for which a right is exercised and the motive for the exercise of that right - principles discussed. HELD: No evidence to justify conclusion that the Defendants' purpose in exercising the requisition right was other than to procure a general meeting to consider and, if thought fit, to pass Resolutions A and B - hostility, ill-will or self interest does not invalidate the exercise of the requisition right if the purpose of the requisition is to have a resolution considered at a general meeting. Acts Interpretation Act, 1901 (Cth) - s.23(b) Companies Act 1961 - s.118 LEGISLATION CITED : Interpretation Act 1897 (NSW) - s.21(b) Report of the Committee on Company Law Amendment (UK Cmd 6659, 1945) ("the Cohen Report") Corporations Act, 2001 (Cth) - s.201E, s.203D, s.249D, s.249Q, s.1322 - Claremont Petroleum NL v Indosuez Nominees Pty Ltd (1986) 10 ACLR 520 - Dowling v Colonial Mutual Life Assurance Society (1915) 20 CLR 509 - Humes Ltd v Unity APA Ltd (No 1) [1987] VR 467 - IOC Australia Pty Ltd v Mobil Oil Australia Ltd (1975) 11 ALR 417 - NRMA v Bradley (2002) 42 ACSR 616 CASES CITED : - NRMA v Snodgrass (2002) 42 ACSR 371 - Ngurli Ltd, Carinya Ltd, Fitzroy Ltd & Myall Ltd v - McCann (1953) 90 CLR 425 - Swansson v R.A. Pratt Properties Pty Ltd (2002) 42 ACSR 313 - Taylor v McNamara [1974] 1 NSWLR 164 - Totally & Permanently Incapacitated Veterans' Association of NSW Ltd v Gadd (1998) 28 ACSR 549 - Williams v Spautz (1992) 174 CLR 509 DECISION : Requisition for meeting of NRMA to consider Resolution A valid; requisition for meeting to consider Resolution B invalid; general meeting of NRMA required to be held; temporary extension of time granted.
1 This application represents yet another skirmish in the internecine war which has engulfed the Plaintiff ("NRMA"). The Defendants, Messrs Scandrett and Snodgrass, who are members of the NRMA, have requisitioned an Extraordinary General Meeting for the purpose of considering and, if thought fit, passing two resolutions. There is no dispute that sufficient members of NRMA have joined together with Messrs Scandrett and Snodgrass to requisition a meeting in accordance with s.249D(1)(b) of the Corporations Act, 2001 (Cth) ("CA"). 2 NRMA, however, seeks declarations to the effect that it is not obliged to call and hold the meeting, on the following grounds:
5 The subject resolutions have been called by the parties "Resolution A" and "Resolution B" and are in the following terms: Resolution A: "That the following Directors be removed as Directors [of NRMA] : Ms Kathleen Evans Mr Bruce Fisher Mr Brian Johnston Mr Ken Rennie Mr Ross Turnbull."
Resolution B: "That each and every member appointed by the Board as a Director to fill a casual vacancy on the Board, if any, between the period:
be removed as Directors of National Roads and Motorists' Association Limited." The relevant background facts
6 Each of the five directors referred to in Resolution A was appointed to fill a casual vacancy arising from the resignation of another director. Each resigning director was identified as a member of that group or faction within NRMA which is associated with Mr N.R. Whitlam and which is known as "Members First" or "The President's Team". 7 The two resolutions were contained in separate requisitions under CA s.249D, both of which were served on NRMA on 18 October 2002. Shortly thereafter, one of the directors who had been appointed to fill a vacancy, Mr Rennie, resigned. 8 The Extraordinary General Meeting of members referred to in Resolution B was, on 17 October 2002, adjourned to a date to be fixed, without having transacted any business. Accordingly, the period referred to Resolution B has not yet commenced to run. The 2002 Annual General Meeting of NRMA has been postponed to 14 January 2003, but it is not yet clear whether the meeting will actually take place on that day. Whether group removal of directors valid
9 Mr Einfeld QC submits that Resolution A cannot validly be passed by a meeting of NRMA because it seeks to remove more than one director. He says that, both as a matter of general legal principle and as a matter of the proper construction of CA s.203D a director can be removed only by a resolution confined in terms to the removal of that particular director. Since Resolution A could not validly be passed at any meeting, says Mr Einfeld, the law does not require that a meeting be convened to consider it. He relies upon NRMA v Bradley (2002) 42 ACSR 616 and on the authorities therein cited. 10 CA s.203D relevantly provides: " Removal by members - public companies
A public company may by resolution remove a director from office despite anything in:
(a) the company's constitution (if any); or (b) an agreement between the company and the director; or (c) an agreement between any or all members of the company and the director.
If the director was appointed to represent the interests of particular shareholders or debenture holders, the resolution to remove the director does not take effect until a replacement to represent their interests has been appointed.
(2) Notice of intention to move resolution for removal of director
Notice of intention to move the resolution must be given to the company at least 2 months before the meeting is to be held. However, if the company calls a meeting after the notice of intention is given under this subsection, the meeting may pass the resolution even though the meeting is held less than 2 months after the notice of intention is given.
The company must give the director a copy of the notice as soon as practicable after it is received.
The director is entitled to put their case to members by:
(a) giving the company a written statement for circulation to members (see subsections (5) and (6)); and (b) speaking to the motion at the meeting (whether or not the director is a member of the company).
(5) The written statement is to be circulated by the company to members by:
(a) sending a copy to everyone to whom notice of the meeting is sent if there is time to do so; or (b) if there is not time to comply with paragraph (a) - having the statement distributed to members attending the meeting and read out at the meeting before the resolution is voted on.
(6) The director's statement does not have to be circulated to members if it is more than 1,000 words long or defamatory.
If a person is appointed to replace a director removed under this section, the time at which:
(a) the replacement director; or (b) any other director; is to retire is to be worked out as if the replacement director had become director on the day on which the replaced director was last appointed a director.
…" 11 Mr Einfeld's first submission is that to treat directors in groups for the purpose of a resolution to remove is to disregard the fundamental principle which guides directors in their office and by which their conduct is to be evaluated. That principle is that a director must act independently in the best interests of the company as a whole. As directors are required to act independently, he says, they must be judged independently - they cannot be judged in a "block". 12 The duty of a director to act independently in the discharge of the duties of his or her office does not have any necessary link to the reasons for which that director may properly be removed by members or to the procedure by which he or she may be removed. A director may be removed from office for any number of reasons which may have nothing to do with the director's independence or lack of it. For example, the members may form the view that two or more directors, independent though they are, are incompetent and for that reason they should be removed. Or again, two or more directors may have participated in some dishonest or improvident transaction in which the company engaged so that members wish to remove at one stroke all directors who were involved. To take another example, a director may be acting with perfect probity and in a way which he or she genuinely believes is in the interests of the company as a whole, yet the members may form the view that the director's "vision" for the company, independently formed but shared with other directors of like mind, is not what the majority wants and that that director, as well as the others of like mind, should all be removed forthwith. 13 In other words the members may take the view that a group of directors, although comprising different individuals, should all be removed for the same reason and that it is, therefore, appropriate and expedient to remove them by the same resolution. CA s.203D(3), (4) and (5) afford to each director in the group the separate and independent right and opportunity to persuade the members that they are wrong about his or her relationship with other directors under threat of removal, that he or she is not affected by the same considerations as may apply to the other directors, or that if he or she is affected by the same considerations, nevertheless those considerations do not justify removal. But that is the only right which the subsections afford; they do not expressly or implicitly require that that case be in response to a separate resolution directed to each director under threat of removal. 14 In my opinion, as a matter of general principle the duty of a director to act independently does not impose a corresponding obligation on the company's members to consider that director's proposed removal separately and independently from the proposed removal of other directors. For these reasons, I am unable to accept Mr Einfeld's first submission. 15 Mr Einfeld's second submission relies upon CA s.201E, which prohibits the passing of a resolution for the appointment of two or more directors unless a general meeting of members has first unanimously resolved that the appointments may be voted on together. A similar provision was to be found in s.118 of the Companies Act 1961 and in the successor corporations legislation. It derives from a recommendation in paragraph 130 of the Report of the Committee on Company Law Amendment (UK Cmd 6659, 1945) ("the Cohen Report"). The recommendation was expressly adopted by the NSW Parliament in the 1961 Companies Act: see Second Reading Speech, Hansard, NSW Legislative Council, 16 November 1961 at pp.2598-99. 16 The policy behind s.201E and its predecessors has been explained thus by Austin J in Howard v Mechtler (1999) 30 ACSR 434 at 443: "That provision exists for an important policy purpose. … 'the purpose of saving members the embarrassment of having to elect X whom they may not want when they elect Y whom they do want.'
Therefore, disregard of that provision is likely to produce substantial injustice." 17 Mr Einfeld submits that if a resolution is proposed for the removal of two or more directors it would be an embarrassment to members to have to remove X, whom they wish to retain, when they remove Y and Z, whom they do not wish to retain. Accordingly, he says, the general policy of the Corporations Act must be to permit members to vote in respect of directors individually, whether the vote relates to the director's appointment or to the director's removal. 18 In my opinion, the policy which underlies the provisions of CA s.201E regulating the appointment of directors cannot be read into the provisions of s.203D so as to regulate the removal of directors. I have reached this conclusion for the following reasons. 19 First, the two sections deal with acts of a company which are quite different in nature and which have quite different consequences. Accordingly, considerations applying to the appointment of directors do not necessarily apply to their removal. For example, a candidate for appointment may not be known to members; if that candidate's appointment is linked in the same resolution to the appointment of a well known, existing director, members may be willing to take the risk of appointing an unknown and unsuitable director for the sake of appointing one who is known and regarded as highly suitable. The appointment of the unsuitable director may later prove to be disastrous for the company but the company may suffer damage before that director can be removed. 20 On the other hand, the performance in office of directors under threat of removal is likely to be known to members, enabling them to form a judgment as to which they wish to retain and which they wish to remove. If the majority comes to the view that one or more of a group of directors the subject of a single removal resolution should be retained and the rest removed, it can achieve that end by simply voting against the resolution in its original terms and procuring a fresh resolution or else voting to amend the resolution by deleting the name of the director to be retained: see the discussion at paragraphs 31 and 32 infra. 21 Second, the omission from CA s.203D of provisions similar to those in s.201E so as to ensure that two or more directors cannot be removed by a single resolution tells strongly against the proposition that the same policy considerations underlie both sections. It would have been very easy to incorporate into s.203D provisions similar to those in s.201E if that had been Parliament's intention. The issue of "block voting" had been under discussion in the United Kingdom and in Australia since the 1945 Cohen Report but only in relation to the appointment of directors, not to their removal. It would be presumptuous to think that, in enacting s.118 of the 1961 Companies Act and its successor sections in later corporations legislation, the legislature has simply overlooked the obvious questions whether the removal of directors should be subject to the same provisions as their appointment and, if so, whether there should be an express provision to that effect in the legislation. On the contrary, it is safe to conclude that the legislature's omission to regulate the removal of directors in the same way as their appointment is deliberate because the same policy considerations are not seen to underlie both appointment and removal. 22 Third, Mr Einfeld focuses on the fact that CA s.203D refers throughout only to "a director" or "the director". This use of the singular indicates, he says, that a resolution for the removal of a director means a resolution for the removal of only one director. Mr Einfeld frankly concedes that there are two authorities contrary to this submission but he says that those authorities, while they have persuasive weight, do not bind this Court and should not be followed. The authorities are Taylor v McNamara [1974] 1 NSWLR 164, a decision of Mahoney J (as he then was), and Claremont Petroleum NL v Indosuez Nominees Pty Ltd (1986) 10 ACLR 520, a decision of the Queensland Court of Appeal which followed and applied Taylor v McNamara . 23 In Taylor v McNamara the plaintiff was one of the directors of a company all of whom had been removed by a single resolution of the members purportedly passed under s.120(1) of the Companies Act 1961 . That section, a predecessor of CA s.203D(1), provided: "A public company may by ordinary resolution remove a director before the expiration of his period of office, notwithstanding anything in its articles or in any agreement between it and him but where any director so removed was appointed to represent the interests of any particular class of shareholders or debenture holders the resolution to remove him shall not take effect until his successor has been appointed." 24 The plaintiff sought a declaration that the resolution removing him was invalid because s.120(1) authorised the removal of only one director by any resolution. The plaintiff conceded that s.21(b) of the NSW Interpretation Act 1897 prima facie operated to require that reference in s.120(1) to "a director" in the singular be read as including the plural. That section has effect "unless the contrary intention appears" . The plaintiff submitted that the general policy of the Companies Act demonstrated a contrary intention. 25 At pp.170-171, Mahoney J said: "In the application of s 21 (b) and the determination of whether there is a contrary intention within the meaning of that section, it is of course necessary to determine what is the relevant legislative intention. This intention is to be derived from the terms of the statute. The intention or the existence of a contrary intention may be inferred from an actual inconsistency between the text of the statute as it is and the text of the statute as it would be if it were expanded by the application of the Interpretation Act . The inference of a contrary intention is not, of course, limited to such a case. Such a contrary intention may be inferred from, for example, the assumptions which are found to be made by the statute or from the general structure of the remedy or the procedure provided by the statute. However, the basic question remains the determination of the intention of the statute and the references in general terms to 'the policy of the legislation' sometimes tend to mask rather than to elucidate the nature of the problem in question.
I can see a number of reasons of policy (if that term be appropriate to be used) why the legislature, had it chosen to adopt that particular policy in relation to removal of directors, might well have required that the removal of a director or directors before the expiration of his or their term of office should take place only in relation to individual directors or directors one at a time and not in relation to all or several of the directors at one time or by one resolution. However, Mr. Tolhurst in his argument has not been able to point to anything in the statute which indicates that the legislature has adopted such a policy, and, in the absence of some such indication of intention, I do not think that I should limit the effect which, prima facie, s. 120 (1) as supplemented by s. 21 (b) of the Interpretation Act would normally have." 26 His Honour concluded that there was no reason why it should be inferred that the intention of the legislature was inconsistent with the reading of "a director" in s.120(1) as "directors" as required by the Interpretation Act , so that a resolution under that section for the removal of all directors of a company was valid. 27 Taylor v McNamara is directly in point in the present case because the words of s.120(1) of the 1961 Companies Act are, in essential respects, the same as the words of CA s.203D(1), and s.21(b) of the NSW Interpretation Act is to exactly the same effect as s.23(b) of the Commonwealth Acts Interpretation Act, 1901 , which applies to the Corporations Act . 28 Mr Einfeld says, however, that Taylor v McNamara should not be followed because the Court did not give any attention to the policy which was evident in s.118 of the Companies Act . Section 118 was, of course the predecessor to CA s.201E. Mr Einfeld's submission that Taylor v McNamara was wrongly decided is, therefore, essentially the same submission as he has made in regard to the policy of the Corporations Act as that policy is said to emerge from s.201E. 29 It is inconceivable, in my opinion, in construing s.120(1) of Companies Act , Mahoney J overlooked s.118 when coming to the conclusion that nothing in that Act evinced the legislative policy for which the plaintiff contended. For the reasons which I have given above, I do not think that either s.118 of the Companies Act or CA s.201E evinces a general legislative policy that the removal of directors should be effected by separate resolutions. In my view, Taylor v McNamara was rightly decided and should be followed. 30 Fourth, Mr Einfeld submits that Resolution A cannot validly be put to a meeting because it cannot be passed in the terms proposed. That is so because the resolution proposes the removal of five directors, including Mr Rennie, and Mr Rennie resigned as a director shortly after the requisition containing Resolution A was delivered to NRMA. 31 I do not think that this submission has any substance because Resolution A could validly be amended at a general meeting so as to delete Mr Rennie's name. The applicable principle is stated by Young J (as he then was) in Totally & Permanently Incapacitated Veterans' Association of NSW Ltd v Gadd (1998) 28 ACSR 549. At 553, his Honour, after reviewing the authorities, says: "…an amendment cannot go beyond the matters to which the shareholders' attention has been drawn in the notice of meeting, but if the general substance of what is in the notice of meeting is not affected by the resolution as passed, or something lesser is proposed by way of amendment, then that is quite in order." 32 The substance of Resolution A is the removal of five named directors. If one of the named directors is no longer in office at the time of the meeting, an amendment to the resolution to remove the name of the ex-director is well within the substance of the original resolution because all it seeks to do is to achieve what was necessarily implicit in the resolution in the first place, namely, the removal of such of the named directors as are in office as at the date of the meeting. 33 For those reasons, NRMA fails in its submission that Resolution A is not a resolution which can validly be passed at a meeting of the company. Whether resolution for removal of future directors valid
34 If resolution B were passed, a director appointed to fill a vacancy during the specified period would be removed from office immediately upon, and by virtue of, his or her appointment. It would be impossible for such a director to exercise the right to put his or her case to members in accordance with CA s.203D(3), (4) and (5). 35 This is sufficient, in my view, to lead to the irresistible conclusion that CA s.203D(1) and (2) apply only to a resolution to remove a director who is in office at the time that the notice of intention to move the resolution is given to the company. Resolution B seeks the removal of unnamed directors not yet appointed so that it may not validly be passed at a meeting of NRMA. Whether requisition for Resolution A invalid
36 Because Resolution B may not validly be put to a meeting of NRMA, it is necessary to deal with NRMA's remaining submissions only in so far as they relate to the question whether a meeting must be called to consider Resolution A. 37 Mr Einfeld's submissions in this regard found upon the established principle that the right given to members of a company to requisition a general meeting, such as is afforded by CA s.249D(1), is a right which must be exercised for the purpose for which it is given. If a member exercises the right to requisition a meeting for a purpose other than the passing of the resolution contained in the requisition then the requisition is invalid: see Ngurli Ltd, Carinya Ltd, Fitzroy Ltd & Myall Ltd v McCann (1953) 90 CLR 425, at 438; Humes Ltd v Unity APA Ltd (No 1) [1987] VR 467, at 470-471. 38 Mr Einfeld says that the Defendants have exercised their right under CA s.249D(1) to requisition a meeting to consider Resolution A for a number of purposes which render the requisition invalid. It is important to note at the outset, however, that Mr Einfeld concedes that the Defendants seek to have Resolution A considered and, if thought fit, passed a general meeting of NRMA. Indeed, such scant evidence as there is suggests that the Defendants intend to keep exercising the right to requisition meetings until such resolutions are passed as will give them and other members of like mind control of the Board. Mr Einfeld concedes that the recent history of NRMA meetings and the voting thereat cannot justify a submission that there is no prospect of Resolution A being passed. 39 Mr Einfeld submits, however, that in addition to the purpose of having Resolution A passed, the Defendants have other purposes in requisitioning a meeting which are improper. The improper purposes, he says, invalidate the exercise of the requisition right. Mr Einfeld formulates his proposition thus: if a member has more than one purpose in requisitioning a general meeting, one purpose being to have the meeting consider and, if thought fit, pass the resolution the subject of the requisition, and another purpose being, for example, to harass the company or to cause trouble and expense to its directors, then the existence of the second purpose vitiates the requisition entirely. Mr Einfeld acknowledges that this proposition is contrary to authority but he says that that authority is wrongly decided. 40 Before discussing this proposition as a matter of principle, I should deal with the submissions as to the particular alleged purposes of the Defendants said to be improper. 41 First, Mr Einfeld says that Resolution A must be seen together with Resolution B as "part of a package", both resolutions representing an attempt by the Defendants to fetter the power of the Board to fill casual vacancies which is conferred by Article 87 of the NRMA Constitution 42 I am unable to accept this submission. Resolutions A and B are not linked or otherwise made interdependent. If only Resolution A goes to a meeting and is passed, what will have happened is that the Board will validly have exercised its right under Article 87 to fill casual vacancies by appointing certain directors and the Defendants will subsequently have validly and successfully exercised their rights under s.249D(1) and s.203D(1) to procure a general meeting whereby the will of the majority of members as to the continuance in office of those directors has been expressed. Both the Board and the requisitionists will have availed themselves of co-existing legal rights, neither of which is paramount to the other. The Board has no right under Article 87 or under the Corporations Act to entrench in office the directors which it appoints to fill casual vacancies, as CA s.203D(1) makes plain. 43 Second, Mr Einfeld says that the requisitions for a meeting to consider Resolutions A and B should be seen as part of a campaign which is being waged for the benefit of one group of directors in order to enable that group to gain control of the Board, regardless of the cost to NRMA, financial or otherwise. 44 Let it be assumed that such is, indeed, the purpose of the requisitionists. Even so, that purpose is not an improper one. The right to requisition a meeting under CA s.249D(1) for the purpose of removing directors under s.203D exists so that something akin to the democratic process is allowed to work in the governance of public companies. 45 Just as in the body politic, so also in the body corporate, factions contend for power. The faction in office usually regards as abhorrent the very possibility that the opposing faction may itself achieve office, firmly believing that the opposing faction does not have at heart the best interests of the body as a whole. The opposing faction entertains the same charitable view of the motives held by the faction in power. In the body politic the will of the majority is permitted to decide the contest as often as elections may lawfully be held. In the case of a public company, the will of the majority is permitted to decide the contest as often as members can muster sufficient numbers to invoke the right to requisition a meeting under s.249D(1) for the purpose of a resolution under s.203D(1). 46 It so happens that convening a general meeting of NRMA is an extremely expensive process because the company has some two million members. But that circumstance, peculiar to NRMA, does not extinguish or modify the right of its members, in common with members of all public companies, to requisition a meeting as often as they can obtain the requisite numbers under s.249D(1) so long as it can be seen that the purpose in requisitioning the meeting is a proper one. 47 Mr Einfeld says that the Defendants do not have a proper purpose because they have evinced an intention to requisition meetings as often as they can, regardless of the heavy costs of convening them, "in order to advance a private agenda" . He points to what he says is intemperate, even defamatory, language in the draft Statement in support of Resolutions A and B provided by the Defendants to NRMA for circulation to members pursuant to CA s.249P. He says also that the Defendants must have known that Resolution B was invalid. 48 NRMA bears the onus of proving that the Defendants actually intend to inflict on it unnecessary financial expense as a tactic in their battle for control of the Board. I cannot find that it has discharged that onus, for the following reasons. 49 The Defendants' requisitions are in response to a particular action of the Board, i.e. the filling of certain casual vacancies. The draft s.249P Statement and many other public statements of the Defendants which have been adduced in evidence leave me in no doubt that the Defendants believe strongly that the directors presently in the majority on the Board of NRMA, the so-called "Members First" faction, have acted in a manner that is highly detrimental to the interests of the company as a whole and that the appointment of the directors named in Resolution A to fill casual vacancies was simply a manoeuvre by that faction to entrench themselves in office. Whether the Defendants and those other members who support them are correct in that view is not for this Court to judge in the present application but there is nothing in the evidence to suggest that the Defendants and their supporters do not genuinely hold that view. 50 In arriving at these conclusions, I have not overlooked Mr Einfeld's submission that the Defendants must have known that Resolution B was invalid. I am unable to accept that submission. There is no evidence that the Defendants are lawyers or that they received legal advice in the drafting of Resolution B. While the Defendants may well have picked up a few legal point in their many battles with NRMA, I would say, without intending any disparagement, that they would probably be the first to describe themselves as no more than "bush lawyers". I am unable to conclude that the Defendants must have known that Resolution B was invalid. 51 In my opinion, therefore, nothing has been shown by NRMA which would lead to the conclusion that in requisitioning a meeting of members the Defendants had any purpose other than to procure the passing of Resolutions A and B. It follows that the Defendants' exercise of their right to requisition such a meeting under CA s.249D(1) was valid. 52 For the sake of completeness, I should deal with MrEinfeld's submission that if a requisitionist has more than one purpose in exercising the requisition power under s.249D(1), one proper and the other improper, then the power is invalidly exercised. 53 In my opinion, this submission confuses the purpose for which a requisition is made with the motive of the requisitionist in making it. If the purpose for which the requisition is made is truly to have a meeting of members convened in order to consider and, if thought fit, to pass the resolution, then it does not matter that the requisitionist is motivated to pursue that purpose by ill-will or self interest. 54 The rationale underlying the law in this regard is the same as that which applies in the law relating to abuse of process. In Williams v Spautz (1992) 174 CLR 509, the majority said (at 526) that an abuse of process occurs when the purpose of bringing the proceedings is not to prosecute them to a conclusion but to use them as a means of obtaining some advantage for which they are not designed or for some collateral advantage beyond what the law offers. 55 However, if a litigant institutes proceedings to invoke a remedy for which the law provides in such proceedings, then there will not be an abuse of process "even if the [plaintiff] is spurred on by intense personal animosity, even malice, against the defendant: it is not the law that only a plaintiff who feels goodwill towards a defendant is entitled to sue" : Swansson v R.A. Pratt Properties Pty Ltd (2002) 42 ACSR 313, at 321; Dowling v Colonial Mutual Life Assurance Society (1915) 20 CLR 509, at 521-522; IOC Australia Pty Ltd v Mobil Oil Australia Ltd (1975) 11 ALR 417, at 426-427. 56 In the present case, it is quite apparent that the competing factions within NRMA regard each other with intense hostility. Each faction has resorted to legal proceedings and to the mechanisms of corporate regulation and governance contained in the Corporations Act in order to vindicate perceived rights or to redress perceived grievances. If, as in this case, the Defendants resort to the rights under CA s.249D to requisition a meeting for the purpose of passing a resolution valid in terms, then their motivation in doing so is irrelevant to the question whether the requisition power is properly exercised. 57 By way of final observation on this aspect of the matter, I strongly endorse what was said by Windeyer J in NRMA v Snodgrass (2002) 42 ACSR 371, at 376: "It seems to me extraordinary that in a company limited by guarantee with about 2 million members a general meeting can be summoned by requisition of 100 members, namely one in every 20,000 or 0.005%. There is provision under s 249D (1A) for prescription by regulation of a different number of members for the purposes of the application of s 249D (1) (b) to a particular company. The evidence shows that a regulation proposed for a general class of companies was disallowed in the senate some years ago. Despite that it seems to me that the time has well and truly arrived for a regulation to be made under this section in respect of NRMA. Nevertheless until it is the rights of members must be decided on the basis of their present rights." Conclusion
58 Resolution B cannot validly be passed at a general meeting of NRMA so that the declarations sought in paragraphs 9, 10, 11 and 12 of the Amended Originating Process should be made. I do not think that any utility is served by granting the injunction sought in paragraph 14. 59 Resolution A can validly be passed by a general meeting of NRMA and the requisition made by the Defendants for the purpose of convening such a meeting was validly made. NRMA is obliged to convene such a meeting so that the declarations and order sought in paragraphs 2, 3, 4, 5 and 7 of the Amended Originating Process are refused. 60 When that meeting is to be held is yet to be determined; its timing may depend upon the timing of other meetings of NRMA which are presently the subject of proceedings before Windeyer J. 61 I have already made an interlocutory order under CA s.1322 extending the time for calling and holding the meeting the subject of the present requisition until 25 November 2002 and I have stood these proceedings over before Windeyer J on that day in order that his Honour may deal with this aspect of the matter at the same time as dealing with the question of the other meetings which are to be held. 62 There remains the question of the relief sought in paragraphs 15 and 16 of NRMA's Amended Originating Process, namely, whether the Defendants' draft s.249P Statement is defamatory and whether it must be distributed to members. These issues have not been argued and were stood over to await the determination of the other questions in the proceedings. 63 I will deal with the further conduct of the proceedings when the matter is brought back for the making of orders in accordance with Short Minutes and for argument as to costs. - oOo -
Last Modified: 11/26/2002 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
NRMA Limited
Scandrett & Anor
(1915) 20 CLR 509
(1975) 11 ALR 417
(1953) 90 CLR 425
(1992) 174 CLR 509
Resolution B was declared incapable of valid passage; the Court rejected NRMA’s challenges to Resolution A and its requisition, held that NRMA was obliged to convene a meeting to consider Resolution A, and did not grant the requested injunction against further similar requisitions. A temporary extension under s 1322 had already been made, with the meeting’s timing to be considered alongside other NRMA meeting proceedings. Issues about the draft s 249P statement and costs remained unresolved. ( [58]–[63] )